Whether it be the cutting-edge tech or ultra-smooth performance, getting behind the wheel of your newly purchased car can be very exciting. Apart from being legally mandatory, it is also wise to protect your new car under a suitable car insurance policy.
You can come across all sorts of insurance policies when you start looking for one, but it is imperative that you select the right car insurance policy.
Many people opt for a collision and comprehensive insurance policy, which covers almost all kinds of damages. However, these two insurance policies will depreciate the value of your brand new vehicle the moment you hit the roads with it.
Here is where a new car replacement insurance policy kicks in. It can help you preserve the original value of your car and provide you with the best coverage in case of a totality. In this article, we will answer the question: is replacement cost insurance worth it?
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What Is A New Car Replacement Insurance?
A new car replacement policy will enable you to file a claim for the amount equal to the original cost of a brand new car of the same model and make in case your car is stolen or involved in an accident that leaves it totaled. However, a new car replacement insurance policy will require a deduction of the predetermined deductible, just like any other car insurance policy.
For instance, suppose you have purchased a new car for $50,000 along with comprehensive car insurance. If your car is totaled following a severe car accident in a few months, your car insurance will pay you for the depreciated value of your car. Let’s say the depreciation of 10% is applicable; your car insurance will pay you $45,000 minus the deductible. Whereas, under a replacement policy, you would get reimbursement for the entire value of your car (minus the deductible).
The cost of a new car replacement insurance policy may be higher than a collision or comprehensive insurance. But for what it’s worth, you will get the best value for each cent you spend in case of a severe car crash or theft.
Factors That Drivers Need For A New Car Replacement Insurance
Is replacement cost insurance worth it? Although a new car replacement insurance policy will provide you with the best value for your totaled car, you should still consider the following factors to determine whether or not a new car replacement insurance is worth it for you:
Financial liberty
The first thing to look at is if you have the financial liberty to opt for a new car replacement insurance. If you have already put everything on the line to buy that new car of yours, then it may not be recommended to buy the new car replacement insurance.
However, if you have a financial cushion that can absorb the cost of a new car replacement insurance policy, then you must go for it.
Probability of accident
The more you drive your car, the higher the probability of an accident occurring. Therefore, if you often take your car on longer rides, it is highly recommended you purchase a new car replacement insurance policy.
However, if you only drive a few miles on the streets with low to moderate traffic, purchasing a new car insurance policy might not be beneficial.
Type of vehicle
If you have just purchased a brand new sports or luxury car, purchasing a new car replacement insurance becomes necessary. This is because luxury and sports cars depreciate quicker than ordinary cars.
Brand
Another thing to look at is the brand of your new car. Some brands like Toyota, Volvo, etc., do not lose value as quickly as other brands. Thus, if your car gets totaled within the initial years, you will get most of the value for your car.
Hence, if you buy a brand that does not depreciate quickly, a new car replacement insurance may not be beneficial. However, if such is not the case, you must consider purchasing a new car replacement insurance policy.
Cost Of Replacement Policy
The cost of a new car replacement insurance policy differs per vehicle, driver, location, and insurer. However, in most cases, a new car replacement insurance policy costs much more than a collision or comprehensive insurance. Nevertheless, the best way to get an accurate price for a new car replacement insurance is to seek quotes from an insurer.
A new car replacement insurance policy may seem more costly at first, but given the benefits, it can save you from huge expenses if your new car is involved in a serious accident. For some brands, the policy may cost as low as $20 per month. The main factors that drive the costing of a new car replacement insurance policy are:
- The length of coverage of your policy
- The make and model of your car
- Category of the vehicle (luxury, sports, SUV, Sedan, etc.)
- The insurance company
It is pertinent to mention here that the cost of a new car replacement insurance may significantly increase year after year.
Endnote
If you have been wondering, “is replacement cost insurance worth it,” you now have the necessary information to make a decision.
No one wants their brand new car to turn into a wreck. However, no one knows which turn could be the wrong one. Therefore, it is a wise choice to opt for a new car replacement insurance policy provided that you can afford it and your insurer offers it.
So, if you own a brand new luxury or sports car or indulge in longer daily commutes in your new car, then a new car replacement insurance is a must-have. It will safeguard the original value of your car and get you reimbursed for the entire value of your vehicle for the same make and model.
Some insurance companies even allow you to purchase a new car replacement insurance policy anytime within the period as stipulated and agreed by the insurer and dealer. It is best to talk to an insurance professional who can guide you through the process.
